This sizzling summer, the grid wants heat relief, too

With this summer’s lengthy heat waves and record demand for electricity, the need to prevent widespread blackouts is again throwing conservation — and the aging electrical grid — onto center stage. GE’s Bob Gilligan just wrote a piece for Bloomberg Businessweek in which he explains that firing up expensive “peaker plants” to add extra power to the grid to meet daily demand spikes is the same as if giant amusement parks were designed with only handling massive spring break crowds in mind. “Operators could expand their parks to assure they could meet peak load requirements,” he writes, “but rides would be vastly underutilized most of the time. Instead, some amusement park owners offer pricing and promotions to balance the number of visitors throughout the year, lowering service costs by eliminating the need for expansion while maintaining quality standards.” It’s the same idea being pursued in the smart grid arena.

As Bob, who’s vice-president for GE’s Digital Energy business, says in the essay, the current system is not only technically inefficient, its market dynamics exacerbate the problem. “At the height of the recent heat wave, New York City’s wholesale power prices jumped sixfold from the cooler off-peak hours of the early morning to the hotter on-peak hours of the late afternoon,” he writes. “These costs are ultimately passed along to the consumer, but today the costs are masked in an average rate structure. Today, the majority of residential electricity customers pay one set price — all day long — even though the utility’s cost of producing electricity actually varies throughout the day. A smarter grid will enable more cost transparency, providing the opportunity for consumers to shift their use to the times of day when power is ‘on sale,’ which we call off-peak periods. ...This in turn will enable utilities to balance the load and ensure system stability on primary grid infrastructure, preventing the need for utilities even to turn on peaker plants.”

In his essay, Bob points out that with the smart grid still in its infancy, utilities, regulators, and consumer advocacy groups face the tough task of juggling and defining changes to existing regulations, business processes, and technology. “On the surface this may seem straightforward,” he says, but it’s anything but.

“The complexity of this balancing act was demonstrated with the recent decision by the Maryland Public Service Commission to deny Baltimore Gas & Electric’s proposed investment to deploy smart meters, an initial stepping-stone to smart grid optimization,” he explains. “The regulators’ rejection stemmed from BGE’s plan to have consumers pay for the upgrade without associated guarantees of customer benefit.”

As Bob observes, “the question of who pays and who benefits will need to be worked out on a case-by-case basis,” adding that over time, the regulatory model will evolve to ensure that appropriate incentives are in place to drive the desired utility investments.”

That question of who pays — and whether there are obstacles to consumer acceptance — is the subject of a provocative post just published on GE’s recently redesigned ecomagination website by energy analyst David Leeds.

As David notes in “Why don’t consumers get the smart grid?”: “To utilities, a smarter grid will lay the foundation for technologies that seemed outlandishly futuristic a few years ago: electric cars, cities that can insulate themselves from rolling blackouts, homes automatically tuning themselves to the weather and alternative energy that can compete economically with coal. But to consumers, the smart grid so far is an extra charge on their bill they don’t particularly like.”